ibibo merges into MakeMyTrip – Consolidation in Travel / Hotel Bookings

makemytrip-ibibo-mergerMakemytrip announced that Naspers (91% stakeholder) and Tencent (9% stake) will sell the Ibibo Group to Makemytrip in exchange for fresh shares issued by Makemytrip amounting to 40% stake in the combined entity. Post the merger, Deep Kalra and Rajesh Magow of Makemytrip will continue as Group CEO and India CEO, respectively, while Ashish Kashyap, the CEO of Ibibo will join Makemytrip as Co-Founder & President. Based on transaction data and FY15 financials available from the Ministry of Corporate Affairs, our back of the envelope estimation of net revenues for Ibibo group points to US$260mn of net revenues for the combined entity (US$170mn from MMYT and US$90mn from Ibibo group).

Ibibo seems to be ahead of MMYT in standalone India hotel booking (3.6mn transactions vs. 2.4mn for MMYT) and has also grown faster in this segment in FY16 (420% YoY vs. 300% for MMYT). Ibibo Group also owns Redbus, which it had acquired in 2013 for a reported valuation of US$100mn. Redbus is the market leader in online bus booking in India and reported 17mn transactions in FY16, a large number which is likely driving some traffic to Ibibo’s hotel business. Management indicated that it intends to maintain the different brands at the front-end even if there is some consolidation at the back-end.

The OTA space in India has been hurt by high burn rates resulting from high competitive intensity despite strong growth. Ibibo has been the key competitor for Makemytrip in the crucial hotel booking segment and reported an EBITDA loss of US$42mn in FY15, mainly on the back of high promotion & advertising expenses. As a result, this consolidation is a game-changer for Makemytrip in our view and should pave the path to profitability for the company.

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